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Uncertainty for Okada Manila is “significant,” says Fitch

There is significant uncertainty about the recovery and expansion prospects of Okada Manila given the severity of the Covid-19 outbreak in the Philippines, Fitch Ratings said.

In a note explaining the negative ratings outlook given to parent company Universal Entertainment, Fitch also said the weak economy and a lack of consumer confidence could lead to a prolonged earnings decline. 

“The IR business expanded rapidly prior to the pandemic and accounted for more than half of UEC's consolidated revenue and EBITDA in 2019,” the note said. “The IR was hit hard in 2Q20 by the lockdown of central Manila, revenue dropping 97 percent yoy and EBITDA swinging to a loss from a solid profit a year earlier.”

The operator has been cutting costs and is now permitted to operate at 30 percent of capacity, but Fitch expects performance to be weak through the end of this year, with EBITDA and free cash flow likely to be negative.  

Fitch said the fact that Universal’s IR business is reliant on just one market was another negative factor contributing to its “B” Long-Term Issuer Default Rating, as is the structural decline in the pachinko market in Japan.

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